Interest Rate for Credit Sales Capped At 15% From 1 Jan 2018

The Consumer Protection (Credit Sale) Regulations 2017 come into force on 1 January 2018. These Regulations apply to all

registered businesses which involve in credit sale transactions, aiming to reduce and cap the high interest rates charged

by credit facility providers.

Key changes:

Term charges:   

Credit facility providers can only impose a maximum fixed interest rate of 15% per annum.

Late payment penalty:   

Credit facility providers can only impose a late payment charges of maximum 5% per annum.

Failure to comply:

For first-time offender:

• A corporate body could be fined not exceeding RM100,000, while repeating offenders could be fined not more than RM200,000.

For non-corporate bodies:

• One could face a maximum fine of RM50,000 or imprisonment not exceeding three years.
• Repeating offenders could face a fine of not more than RM100,000 or imprisonment of not more than five years, or both.

Concluding Thoughts:

At first instance, the new regulations might reduce the profitability of credit facility providers, but they open up a new market

targeting the lower income groups, which means selling prices will be more competitive and should lead to lower product yields.